what to do when vendors don’t do what they said they’d do… second annual statewide contract...
TRANSCRIPT
What to do when vendors don’t do what they said they’d do…
Second Annual
Statewide Contract Manager’s Conference
October 5, 2011 – Texas Capitol Extension Auditorium
Presenter
Wes Ogilvie, Assistant General Counsel, Texas Procurement and Support Services, Texas Comptroller of Public Accounts
The first two steps
• Review the contract and supporting documents.
“What does the contract say?”• Documentation, documentation,
documentation.
“If you don’t write it down, it never happened.”
Next step…
• Talk to the vendor. • Equally important, talk to the right
person! Does the contract identify key personnel on both sides?
• If you don’t hear what you want, escalate the problem to someone else…with the authority to resolve the problem.
• The vendor also needs the appropriate contacts at the agency
Vendor Performance
• Why?– Required by rule– Documentation of the problem– Vendor is supposed to respond to
Vendor Performance Report– Provides rationale for awarding/not
awarding future contracts– Shares information with other
agencies
Contract Management Office
• TPASS Contract Management Office– Provides management of all TPASS
contracts– Investigate vendor performance reports– Serve as an intermediary between the
agency and the contractor
Referral to Counsel
• Consider involving agency counsel
• Shows the vendor that the problem has been escalated internally
• Allows agency counsel to provide advice on options
• Involve counsel early
Corrective Action Plan
• “Probation” for your contractor/vendor
• Should provide for specific steps to remedy defects or non-performance
• Consider incorporating the plan as a contract amendment
• Ensure the plan has measurable, enforceable goals
Liquidated Damages
• Must be specified in the solicitation/contract
• Only allowed when ordinary damages are difficult to calculate
• Cannot be used as fines or penalties
• Requires significant attorney involvement in drafting liquidated damages provisions
Cure Notice
• Newsworthy cure notice
• Provides a set period of time for the vendor to fix the problem before termination of the contract
• Actually, a cure notice may be considered “pro-vendor”
• If you’re at this point, it may be time to think about lead time to get an alternate vendor
Paying the Bill
• Disputing the invoice
• Partial payment– Must be an actual dispute
• Set-off– Rarely used, not favored in state
contracts
Termination
• Cause
– Usually immediate
– Must have a reason
– Cost of cover
• Convenience
– Usually, but not always 30 days in state contracts
– No reason required
• Funding
– Funding out clause
Non-Renewal
• When to consider?
• Neutral on its face
• Negative – need to be thinking about re-procurement well in advance
Uncommon Remedies
• Audit– Performance or financial audit of the
vendor– State Auditor’s Office
• Calling the bond– Performance bonds– Payment bonds
Debarment
• Severe remedy
• Provided for by statute and rule
• Investigation by TPASS
• Decision made by TPASS Director with appeal to Deputy Comptroller
• Agencies may request a debarment investigation
Calling the Cavalry
• Attorney General referral– Requires significant management and
legal buy-in– Uncertain process– Ordinarily requires significant damages
to make it worthwhile
• Criminal investigation– Rarely used, most commonly for fraud,
particularly in invoicing
An Additional Caution
• Offers to remedy almost always require involvement from program staff, procurement staff, and legal counsel
• Danger of waiving remedies for breach